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HHS Releases Final Rule for Health Insurance Market Reforms
The U.S. Department of Health and Human Services released a final rule on Feb. 22 that implements key provisions of the Affordable Care Act (ACA), including the requirement to cover people with pre-existing conditions. The final rule further implements the following five provisions of ACA that are applicable to non-grandfathered health plans:
Effective January 1st, 2014, individual health insurance plans will be guaranteed issue subject to open and special enrollment periods in the individual market. In other words, health insurance companies will be prohibited from denying coverage to people because of a pre-existing condition or any other health factor. In addition, individuals will have special enrollment opportunities in the individual market when they experience certain significant life changes, similar to those in the group market today.
Fair Health Insurance Premium Rating
Effective January 1st, 2014, health insurance companies offering coverage to individuals and small employers can vary premiums based on age, tobacco use, family size and geography. The rule implements the age rating at no greater than 3:1 and tobacco use rating at 1.5:1.
States can choose to enact stronger consumer protections than these minimum standards. In addition, starting in 2017, states have the option of allowing health insurance issuers that offer coverage in the large group market to offer such coverage through the marketplace. For states that choose this option, these rating rules also will apply to all large group health insurance coverage. These rules standardize how health insurance issuers can price products, bringing a new level of transparency and fairness to premium pricing.
The final rule reaffirms existing protections that individuals and employers have with respect to coverage renewal. For example, these protections will prohibit issuers from refusing to renew coverage because an individual or employee becomes sick or has a pre-existing condition. In other words, health insurance companies must renew coverage subject to certain exceptions such as non-payment of premium.
Single Risk Pool
Insurers are required to maintain a single statewide risk pool for claims experience in the individual market and single statewide risk pool for the small group market, unless a state chooses to merge the individual and small group pools into one pool. The single risk pool provision prevents insurers from segmenting enrollees into separate rating pools in order to increase premiums at a faster rate for higher-risk individuals more than lower-risk individuals, as is often the practice today. Premiums and annual rate changes will be based on the health risk of the entire pool.
The final rule also includes provisions for enrollment in catastrophic plans. Catastrophic plans generally will have lower premiums, protect against high out-of-pocket costs, and cover recommended preventive services without cost sharing-providing. Young adults and people for whom coverage would otherwise be unaffordable will have access to a catastrophic plan in the individual market.
Updated Rate Review
In preparation for the market changes in 2014 and to streamline data collection for insurers and states, the final rule also amends certain provisions of the rate review program. Specifically, it adds standards for assessing premium increases in Effective Rate Review Programs. And, to monitor rate increases across the markets, all rate increases must be reported with those that are 10 percent or higher still subject to review.